Celularity Inc Income Taxes Disclosure

18. Income Taxes

 

A summary of the Company’s current and deferred tax provision is as follows:

Schedule of Current and Deferred Tax Provision 

		2024				2023
		Year Ended December 31,
		2024				2023
Current income tax expense:
Federal		$	—			$	—
State			—				10
Total current income tax expense			—				10
Deferred income tax expense (benefit):
Federal			1				1
State			(1	)			(1	)
Total deferred tax expense			—				—
Total income tax expense		$	—			$	10

 

 

A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:

 

Schedule of Reconciliation of the U.S  federal statutory income tax

		2024				2023
		Year Ended December 31,
		2024				2023
Federal statutory income tax rate			21.0	%			21.0	%
State income taxes, net of federal benefits			(1.3	)%			1.4	%
Interest accretion expense			0.1	%			11.0	%
Change in valuation allowance			(20.1	)%			(20.0	)%
Mark to market warrant			—	%			0.5	%
Deferred true-up			(0.1	)%			(2.4	)%
Impairment			—	%			(12.0	)%
Other permanent items			0.4	%			0.5	%
Effective income tax rate			—	%			—	%

 

Net deferred income tax liabilities as of December 31, 2024 and 2023 consisted of the following:

 

Schedule of Deferred tax assets and liabilities

		2024				2023
		Year Ended December 31,
		2024				2023
Deferred tax assets:
Net operating loss carryforwards		$	121,804			$	109,544
Research and development tax credit carryforwards			5,674				5,674
Stock-based compensation expense			17,717				16,539
Startup costs			431				498
Intangible assets			3,028				3,442
Deferred revenue			1,469				1,441
Unicap			5				5
Imputed interest on contingent payments			97				110
Legal fee capitalization and amortization			1,053				1,171
Capitalized research and development			22,903				26,613
IRC Section 163j interest			1,471				—
Other			5,755				4,751
Total deferred tax assets			181,407				169,788
Valuation allowance			(181,416	)			(169,797	)
Net deferred tax liabilities		$	(9	)		$	(9	)

 

A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:

 

Schedule of Unrecognized Tax Benefits

		Unrecognized Tax Benefits
Balance at January 1, 2023		$	1,028
Decrease related to current year tax provision			—
Balance at December 31, 2023			1,028
Decrease related to current year tax provision			—
Balance at December 31, 2024		$	1,028

 

As of December 31, 2024 and 2023, the Company had U.S. federal and state net operating loss carryforwards of $121,804 and $109,544, respectively, which may be available to offset future taxable income and begin to expire in 2040. As of December 31, 2024 and 2023, the Company also had U.S. federal and state research and development tax credit carryforwards of $5,674, which may be available to offset future tax liabilities and begin to expire in 2032.

 

 

Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to an annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income or tax liabilities. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-year period. A corporation that experiences an ownership change is subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate subject to additional adjustments, as required. The Company experienced an ownership change on August 15, 2017. The annual limitation from the ownership change is not expected to result in the expiration of net operating losses or research and development credits before utilization.

 

The realization of deferred tax assets is dependent upon the Company’s ability to generate taxable income in future years. ASC 740-10, Income Taxes, requires a valuation allowance to be applied against deferred tax assets when it is considered “more likely than not” that some or all of the gross deferred tax assets will not be realized. The Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance.

 

At December 31, 2024, based upon the weight of available evidence, the Company concluded that it is not more likely than not that the benefits of the federal and state deferred tax assets will be realized. Accordingly, the Company has recorded a valuation allowance against its federal and state gross deferred tax assets. The valuation allowance increased by $11,619 and $39,272 during the years ended December 31, 2024 and 2023, respectively.

 

The impact of an uncertain income tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained.

 

As of December 31, 2024 and 2023, the Company had gross unrecognized tax benefits of $1,028. The Company does not expect that there will be a significant change in the unrecognized tax benefits over the next 12 months. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31, 2024 and 2023, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s consolidated statements of operations and comprehensive loss. The Company files income tax returns in the U.S. and numerous states, as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company is open to future tax examination under statute from 2019 to the present; however, carryforward attributes that were acquired may still be adjusted upon examination by federal, state or local tax authorities if they either have been or will be used in a future period.